Understanding Interchange ++: A Simple Guide
Interchange ++ is ideal for businesses that want a clear, transparent understanding of their payment processing costs.
Understanding Interchange ++: A Simple Guide
When it comes to accepting card payments, understanding the fees involved can be a bit overwhelming. One of the most transparent pricing models available today is called Interchange ++. But what exactly does this term mean, and how does it impact your business? Let’s break it down.
What is Interchange ++?
Interchange ++ (Interchange Plus Plus) is a pricing model used by payment processors to determine the cost of processing credit and debit card transactions. This model is widely regarded for its transparency because it clearly separates the different components that make up the total processing fee.
The Three Components of Interchange ++
- Interchange Fee
- This is the fee set by the card networks (like Visa, MasterCard, etc.) and paid to the bank that issued the customer's card. The interchange fee varies depending on several factors, including the type of card used (debit, credit, rewards), the transaction amount, and how the transaction is processed (in-person or online).
- Card Scheme Fee
- Also known as the card brand fee or network fee, this is the fee charged by the card network itself (Visa, MasterCard, etc.). This fee helps cover the costs of maintaining and operating the card network.
- Processor's Markup
- This is the fee charged by your payment processor (such as Layopay) for handling the transaction. Unlike other pricing models that bundle all fees into a single rate, Interchange ++ separates this fee, so you know exactly how much you’re paying to your processor.
Why Choose Interchange ++?
- Transparency: One of the biggest advantages of the Interchange ++ model is its transparency. You can see exactly where your money is going, with a clear breakdown of the interchange fee, the card scheme fee, and the processor’s markup. This helps you understand the true cost of accepting card payments.
- Fairness: Because fees are unbundled, you're only charged the exact interchange and scheme fees applicable to each transaction. This means you're not overpaying for low-cost transactions.
- Scalability: For businesses that handle a large volume of card transactions, the Interchange ++ model can often be more cost-effective than other pricing models, especially if most transactions are of high value or made with premium cards.
How Does Interchange ++ Compare to Other Pricing Models?
The most common alternative to Interchange ++ is blended pricing, where the payment processor charges a single, fixed percentage rate for all transactions, regardless of the underlying interchange fees. While blended pricing is simpler, it lacks the transparency of Interchange ++ and can sometimes result in higher overall costs, especially for certain types of transactions.
Is Interchange ++ Right for Your Business?
Interchange ++ is ideal for businesses that want a clear, transparent understanding of their payment processing costs. If you’re a business owner who values detailed insight into where your money is going, this pricing model could be a great fit.
However, it’s important to weigh the benefits of transparency against the complexity it introduces. While some businesses appreciate the detailed breakdown, others may prefer the simplicity of a flat-rate or blended pricing model.
In conclusion, Interchange ++ offers a straightforward, transparent way to understand and manage your card processing fees. By breaking down the costs into their individual components, it allows you to see exactly what you’re paying and why, helping you make more informed decisions about your payment processing strategy.
